The S&P Global Vietnam manufacturing Purchasing Managers’ Index (PMI) returned above the 50.0 mark for the first time in six months during the month of August. At 50.5, the index is up from 48.7 in July and indicates a slight monthly improvement in business conditions in the sector.
Companies consequently increased their purchasing activities, but employment continued to fall slightly, with companies reluctant to hire additional staff given the still fragile demand.
Further price increases were also registered in the middle of the third quarter. Input costs rose for the first time in four months, while selling price inflation was reported for the first time since March.
According to S&P Global, the nascent recovery in the health of the sector reflects tentative signs of improving demand.
Manufacturers recorded a first increase in new orders in six months, while new export business also increased after a five-month streak of declines. Growth rates have been modest, however, despite some reports of continued weak demand.
Likewise, manufacturing production returned to growth in August, ending a five-month period of declining production. However, the rate of increase was only marginal.
The resumption of production and new orders were particularly felt in the capital goods category.
Companies have responded to the increase in new orders and increased production needs by expanding their purchasing activities at a brisk pace. This is the first increase in six months and the largest since last September. In turn, purchase inventories also increased, for the second month in a row.
However, the employment picture is less positive. That said, the rate of reduction was the lowest in this sequence and only marginal.
Continued employment reductions reflect persistent signs of spare capacity in the sector, with work backlogs falling for the eighth consecutive month.
Companies also recorded a build-up in finished goods inventories for the second consecutive month, amid reports that weak demand had left finished goods unsold.
Data for August showed a solid rise in input prices, ending a three-month period of decline. A number of speakers linked rising input costs to rising oil prices, while rising food prices were also mentioned. In turn, companies also increased their own sales prices, albeit slightly. This increase in charges is the first since March.
Supplier delivery times were shortened for the eighth consecutive month as inventories at suppliers remained sufficient to meet orders despite a recovery in input demand in August. The improvement in supplier performance was solid, although the smallest since May.
Timid improvements in market demand helped boost business confidence midway through the third quarter, with companies hoping for a continued recovery in the months ahead. Optimism over the 12-month production outlook was the highest in five months, but remains below the series average due to lingering concerns over the strength of demand.
Andrew Harker, economic director at S&P Global Market Intelligence, said S&P’s latest global manufacturing PMI in Vietnam paints a more encouraging picture of the health of the sector than has been the case in recent months, with production, new orders, exports and purchases. return to growth.
However, improvements remained fairly moderate overall as demand conditions remained fragile. It is therefore probably too early to say that the sector is in full recovery.
Another key aspect of the latest survey is the end of the recent period of low prices, with rising input costs and selling expenses in August, often linked to rising oil prices, he said. declared.